Comparative Income Statement and Balance Sheet


Table of Content


Comparative Income statement


            This is a kind of financial statement which provides information about two or more financial years of the organization. The comparison of the information is being possible with the help of usage of the financial statements. It provides information regarding comparison of the balance sheet, income statement, and statement of changes in equity along with cash flow statement. The example of comparative income statement of the organization is being provided below.


Income Statement

            The income statement is the statement which provides information regarding the level of income being generated by the organization over a particular period of time. The total gain or loss carried out by the organization in the income statement would be taken into consideration at a particular point of time. The comparative incomes and expenses of the organization are going to be reported in the form of equity capital and this is going to work well towards ensuring that, best results are being generated in the area of doing the tasks being assigned at a particular point of time.


 

$

$

Income

 

94,600

Services rendered

946,000

 

Expenses

 

60,366

Salaries

25,000

 

Telephone & internet

6,500

 

Water & electricity

16,000

 

Property rates and taxes

1,000

 

Insurance

7,300

 

Advertising costs

1,000

 

Fuel

2,500

 

Stationery

412

 

Bank charges/interest paid

654

 

Tax expense

3,414

 

Net Profit

 

30,820


Income Statement Example

Income statement question and answer


  • Question: From the following trial balance of Scot & Web company, extracted after one year’s trading, prepare a multistage income statement for the year ended 31 December 2015.

Scott & Web Co – Trial Balance as on 31 December 2015

 

Dr.

Cr.

 

$ 000s

$ 000s

Sales

 

18,462

Purchases

14,629

 

Salaries

2,150

 

Motor exp.

520

 

Rent

670

 

Insurance

111

 

General exp.

105

 

Premises

1,500

 

Motor vehicles

1,200

 

Debtors

1,950

 

Creditors

 

1,538

Bank

1,654

 

Cash

40

 

Drawings 

895

 

Capital

 

5,424

 

25,424

25,424

 

 

 


Stock on 31st December 2015 was at the level of $2548


INCOME STATEMENT OF SCOTT & WEB FOR THE PERIOD ENDED 31 DEC 2015

2015

$

Gross sales

18,462

(Less sales returns and allowances)

0

Net Sales

18,462

Beginning inventory

0

Goods purchased or manufactured

14,629

Total Goods Available

14,629

(Less ending inventory)

(2,548)

Cost of Goods Sold

12,081

Gross Profit (Loss)

6,381

LESS EXPENSES

 

Motor Expenses

520

Insurance

111

Rent

670

Salaries and wages

2,150

Other miscellaneous expenses

105

Total Operating Expenses

3,556

NET INCOME

2825

                                                                                                   Balance Sheet

            This is a kind of financial statement which provides information about the financial position of the organization at a particular period of time. The balance sheet provides information about assets, liabilities, and capital of the organization. The assets and liabilities of the organization are being classified under the category of current and non-current assets of the organization.

                      The image provided below provides an example regarding the balance sheet of the organization.


                                                                                  Balance sheet question and Answer

Question: There are two formats of drawing a balance sheet; the vertical format and horizontal format. The vertical format below is recommended by AS 1. Below is the balance sheet of Scott & web Company as at 31 December 2015 using information provided in the trial balance above

Solution 

SCOTT & WEB CO. BALANCE SHEET (STATEMENT OF FINANCIAL POSITION) AS AT 31 DECEMBER 2015


Assets

2015

Current Assets

$

 

Cash at bank

 

Accounts receivable

 

Inventory (closing stock)

 

Cash in hand

 

Total current assets

Fixed (Long-Term) Assets

 

 

Property, plant, and equipment

 

Motor vehicles

 

Total fixed assets

Total Assets

8,892

Liabilities and Owner's Equity

 

Current Liabilities

 

 

Accounts payable(creditors)

 

Total current liabilities

Long-Term Liabilities

 

 

Long-term debt

 

Total long-term liabilities

Owner's Equity

 

 

Owner's investment(Capital)

 

Retained earnings (Net Income)

 

LESS Drawings


The difference in Income Statement and Balance Sheet

            The income statement provides information about the income being generated by the organization over a particular period. The balance sheet of the organization provides information regarding the fact that, the organization identifies its financial position as on date. This is going to help in making sure that, proper results are being generated in the area of doing the tasks at a particular point in time. 

            In the case of the income statement, if the organization deducts the expenses being incurred by it from the income being earned then, it is a scenario that the organization will be in the position to have identification of its net profit. The balance sheet of the organization provides information regarding its net worth over a particular period of time so that, proper results are being generated. 

Analysis of Comparative Financial Statements

Horizontal Analysis: This is a percentage based analysis wherein, the movements in related items of the organization are being taken into consideration and on the basis of the same, percentage items are being identified. The amount of increase or decrease is being identified. On the basis of comparison of items of two periods, the organization finds out whether it is being done well or not. The previous period is being taken into consideration at the first level before making the comparison. In the case of analysis and comparison of 3 periods, the first period in the list is being taken into consideration for doing the analysis. 

Question on Horizontal Balance Sheet


LINCOLN INC. 

BALANCE SHEET 

AS AT DEC.31, 2003 AND 2002

 

2003

2002

ASSETS

$.000's

$.000's

Current Assets

550

533

Long-term investments

95

178

Property, plant and equipment(net)

445

470

Intangible assets

50

50

Total assets

1140

1,231

LIABILITIES

 

 

Current liabilities

210

243

Long-term liabilities

100

200

Total liabilities

310

443

STOCKHOLDERS EQUITY

 

 

Preferred 6% stock, $100par

150

150

Common stock, $10 par

500

500

Retained earnings

180

138

Total stockholders’ equity

830

788

Total liabilities and stockholder’s equity

1140

1,231


Solution

 

2003

2002

Change

%

 

$.000's

$.000's

Increase/(decrease) amount

Percentage

ASSETS

A

B

C =A-B

C/B*100%

Current Assets

550

533

17

3.2%

Long-term investments

95

178

(83)

(46.5%)

Property, plant, and equipment(net)

445

470

(25)

(5.4%)

Intangible assets

50

50

-

 

Total assets

1140

1,231

(91)

(7.4%)

LIABILITIES

 

 

 

 

Current liabilities

210

243

(33)

(13.6%)

Long-term liabilities

100

200

(100)

(50.0%)

Total liabilities

310

443

(133)

(30.0%)

STOCKHOLDERS EQUITY

 

 

 

 

Preferred 6% stock, $100par

150

150

-

 

Common stock, $10 par

500

500

-

 

Retained earnings

180

138

42

30.5

Total stockholders’ equity

830

788

42

5.3%

Total liabilities and stockholder’s equity

1140

1,231

(91)

(7.4%)


Vertical Analysis

Vertical analysis is being termed as percentage analysis which provides the relationship between each of the components to the total of the single element. In case of the balance sheet, each of the statement is being stated as a percentage of another element and it helps in making sure that, the analysis is being carried out in a proper and appropriate way. 

Example of Vertical Analysis